Bernanke declares war on Canadian economy

Did you smile or cheer when U.S. Federal Reserve Chairman Ben Bernanke announced Quantitative Easing III (and the markets went up)?

He just declared war on your job, and the whole Canadian economy.

Of course, so did the European Central Bank, the central bank of the Peoples' Republic of China and others.

All of them are engaged in the same practice. They're printing money. Gobs of it, in programs that have no end point.

Some are doing it to apply stimulus to revive their economies. Some are doing it to play extend-and-pretend games to hold their banks together.

For a country like Canada, with an economy in reasonably good shape, a government that's not out of control, banks that are healthy and dependent on exports, it's a declaration of war.

The game everyone else is playing is "beggar thy neighbour." All this excess cash, whatever its stated purpose, is designed to bring their currencies down.

Like a see-saw, as they push their currency down the honest Canadian currency goes up. That's why the Canadian dollar is worth so much more lately relative to the U.S. dollar and the other world currencies. It's a measure of their weakness more than it's a measure of our strength, but it doesn't matter. It kills our exports just the same.

Worse, the weaknesses in other countries' economies affects our resource exports just as much as it does our manufactured goods and our services sold overseas.

Well, we could play the game: Mark Carney could drop our interest rates to zero, and print money like it's going out of style. The government could launch a larger Economic Action Plan II and rack up the deficits. Both would lower the Canadian dollar.

It would also send the price of a litre of gasoline and a week's groceries through the roof - food and fuel have gone up 35 to 40 per cent in the countries that are playing the "print and hope" game -- and anyone living on a fixed income, or anyone planning to collect their pension, would be in deep trouble. It's hard to live on zero interest.

But there is something else we can do.

Think quality. Follow, in other words, the model the Germans used to become a high wage, high prosperity country.

It means running our businesses differently. You don't have to compete with call centres parked in Asian countries on cost if your business answers the phone and its employees are empowered to provide service on the spot. You don't have to compete with low-cost labour in other locations if you produce a product of such high quality and strong features that labour costs are a tiny fraction of its worth.

High service -- high quality products. These have a market in Canada (where the value of the Canadian dollar is a plus, if some components or tools must be imported), and as well as abroad because of their quality.

Back in 2001, when the border slammed shut after 9/11 and supply chains in the automotive industry were disrupted, new parts manufacturers got started in Brampton, Ont. Instead of just building a "me, too" product to replace parts that suddenly became hard to get, they built a better product for the same price.

The border now works more or less smoothly, but they still have the business, including being the supplier to American-side assembly plants as well. Quality sells.

A typical German small to mid-sized company -- let's say, one that makes ovens used in a restaurant kitchen to bake small loaves of bread -- looks to produce such a high-quality product that they dominate the world with it. The company in question has a global market share of 93 per cent. Everything is made in the company village in Germany. Their share is so high because their oven is the most energy efficient, fastest to bake, produces consistent results, and doesn't take up much space -- and Germans make the highest average wages in the world doing it.

Long before their products could be found in kitchens worldwide, though, they were found in restaurant kitchens all across Germany.

That's who we should emulate: A people which buys and sells from each other because you can't buy better from anywhere else; A people whose exports don't depend on the exchange rate, because quality sells.

So should Canadians try to outrun the others in a race to the bottom or run to the top, securing our futures, and our children's future?

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